Graduates gesture to loved ones during Spring Commencement at the University of Southern Mississippi on May 13, 2011, in Hattiesburg, Miss.

It can help them assemble an interview-ready wardrobe, avoid the potential indignity of moving back in with parents, and chip away at student loan debt. This year's grads face a tough job market, so they need all the help they can get.

Yet giving a personal check or a stack of bills involves a certain level of trust. Will it be put to good use?

Helping set up an investment in a mutual fund is a better gift if you aim to provide something that will grow in value, and instill savings savvy.

"If you're the beloved relative who gets them set up with that $100-a-month discipline, that's powerful," says Brian Wagenbach, branch manager for the Charles Schwab offices in Minneapolis.

However, unless you're wealthy enough to spend lavishly on gifts, the minimum initial investment to open a mutual fund account can be an obstacle. Most fund companies require investors to start with at least $2,500.

But don't give up if you want to give a fund investment as a gift. There are ways to open a fund account for less than the amounts published on fund websites. Generally the industry is moving toward lower required minimums. For example, Vanguard, the biggest fund company, last week expanded access to its target-date retirement funds by lowering the minimum investment to $1,000 from $3,000.

Here are seven tips for giving a fund investment as a gift:

1. Know your graduate: If the grad's finances are in decent shape, money to set up a fund account can be an appropriate gift. But first consider whether short-term needs may be more pressing, making cash more suitable. If the money can erase a significant amount of high-interest credit card debt, the long-term payoff will be better than socking away the same amount in a retirement account.

Paying off debt and repairing a low credit score can be crucial to achieving goals after college.

"They have to start living in the real world: find a job, a home or an apartment, a car," says Eleanor Blayney, consumer advocate for the Certified Financial Planner Board, the organization that certifies financial planners.

Propriety is in order if you're not sure about the grad's financial circumstances. A discreet inquiry with his or her parents may be the best route.

2. Learn account options: Consider a traditional Individual Retirement Account or a Roth IRA, which allows account holders to set aside after-tax income. However, the graduate must have earned income to qualify for the tax benefits of an IRA. A custodial account is an option only if the gift recipient is an early achiever who earned a degree before age 21.

3. Start small: Don't be put off by the published minimum initial investment amounts. It's often possible to start with a smaller amount for your gift, if you commit to make regular contributions for a few months.

For example, Charles Schwab allows accounts to be set up with as little as $1,000, but investors can start with less if they agree to make monthly contributions of at least $100. Once the account reaches $1,000, the donor can stop giving, and leave future contributions to the recipient.

Some fund companies assess annual fees if account balances are below a few thousand bucks. For instance T. Rowe Price charges a $10 annual fee for each IRA mutual fund account with a balance of less than $5,000. Check a company's rules for setting up IRAs or brokerage accounts.

4. Choose appropriate funds: To simplify matters, avoid mutual funds that assess upfront sales charges, called loads, and those charging above-average investment fees. Also stay away from funds using complex or unusually risky investing strategies. You're giving a gift, and the focus should be on getting someone started, not beating the market.

"It's inappropriate to put someone in an investment they can't explain to their friends," says Schwab's Wagenbach.

Vanguard, Schwab, and Fidelity are among those offering low-cost index funds that require little cash to start, and don't assess upfront sales charges. Those companies also offer target-date funds that encourage long-term investing, and leave periodic portfolio adjustments to the pros. As investors approach their target retirement date and their appetite for risk decreases, the investment mix in these funds becomes more conservative.

Here are four options that get a top-rung 5-star rating from Morningstar, and have modest investing minimums as well as other features that could make them suitable for gifts: Amana Trust Growth (AMAGX), Monetta Young Investor (MYIFX), Oakmark (OAKMX) and American Century Giftrust (TWGTX).

5. Pool resources: Consider contacting other friends or relatives to see whether they're interested in chipping in to start a fund investment. Check with the grad's parents to help coordinate such gifts.

6. Become a matchmaker: Establish a personal 401(k) arrangement with the graduate. You can space out your gift by agreeing to match his or her contributions for a year or two. Each time the gift recipient invests $100, you kick in $25, for example.

7. Provide know-how: Consider pairing your gift with an expenses-paid visit to a certified financial planner who charges on an hourly basis, rather than working on sales commissions. Or get the grad a book about investing. That know-how may prove more valuable than the money you provide to start a fund investment.

"Is $100 or $1,000 going to make a huge difference over the lifetime they invest? Maybe, maybe not," Wagenbach says. "The most important thing is the education they'll get about investing and saving."

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